Unilever will not relocate its manufacturing plant from Kenya despite the rising cost of doing businesses in the domestic market, the firm's CEO Paul Polman, has said.
Mr Polman, who visited Kenya last week as part of his Africa-wide tour, said the consumer goods manufacturer was focusing on increasing efficiency in the production of its brands and was, in fact, increasing its investment in the country.
“We have no plans of relocating from Kenya,” he said after meeting Prime Minister Raila Odinga. “On the contrary, we are investing hugely in innovations, market development activities, manufacturing capacity, technology, working capital, distribution infrastructure and talent development.”
There has been speculation that Unilever could follow the trend of other manufacturers who have relocated to cheaper business destinations.
They include Colgate Palmolive, which has moved its manufacturing to Egypt, Cadbury’s which has shifted the bulk of its chocolate making operations to south Africa and Reckitt Benckiser, among others.
The main issue has been the high cost of power, more times higher than other Comesa countries with energy subsidies, labour and inefficient infrastructure especially, the port, roads and railway which increase the cost of transporting bulk loads by manufacturers.
Mr Polman said the new investments are informed by the huge growth potential in the Kenyan market and the larger East and Southern Africa region.
“This region is already so critical in fuelling the growth delivered by Unilever globally, given that the rest of the developed world is either stagnant, shrinking or confronted by financial challenges,” he added.
He said the Kenyan business unit had experienced high growth over the past years and makes up a sizeable business in Eastern and Southern Africa and the larger Central Africa region.
Mr Polman last visited Kenya in August 2009 and his latest tour signals Unilever’s confidence in the regional markets, he said.
Africa continues to be a growth region and together with Asia and Latin America, the developing and emerging markets contribute more than half of Unilever Global turnover.
He said Unilever was consolidating its manufacturing volumes from the Kenyan factory to build economies of scale to serve an expanded regional market under the free-trading environment provided by the East African Community Common Market Protocol.
There is also opportunity for tapping great talent, he noted, as there is ease of labour movement.
“We anticipate harmonisation of product standards across the region and joint pre-shipment inspections for non-EAC goods,” he said.
He said the consumer goods industry was growing and still had immense potential, fuelled mainly by a growing middle class in developing and emerging economies.
“First it means the consumer has more disposable income and therefore is able to afford the products,” Mr Polman said.
“Secondly, it also means the consumer needs have also evolved as the consumer has become more discerning and demanding. It also presents a growing opportunity to diversify portfolios.”